Updated September 28, 2026
Most of the sale conversations I have about market timing are really conversations about something else. The owner says "I'm watching interest rates" or "I'm waiting to see what happens with RSO." Then twenty minutes in, it comes out: they're 71, they haven't taken a vacation longer than a weekend in six years, and the building calls at 11pm about a water heater. That owner is not making a market decision. They are making a retirement decision and dressing it up as a market one. The two decisions use completely different math, and confusing them is how good sellers end up holding two years longer than they should have.
A market-driven sale asks "is this a good time to sell." A retirement-driven sale asks "how many more years of active management do I want, and what does my life look like without this building." Those are not the same question, and the market's answer to the first one is close to irrelevant to the second. An owner who is done managing at a below-average market moment is usually still better off selling than an owner who holds three more years waiting for a cycle that may or may not arrive on schedule. Life does not wait for cap rates.
Here is the honest tension in this decision, and it is worth sitting with instead of skipping past. If you hold a long-appreciated building until death, your heirs receive it at a stepped-up basis, and the deferred capital gains tax is eliminated entirely — not deferred, eliminated. On a building you have owned for decades, that is real money, sometimes a life-changing amount. Selling now, by contrast, triggers federal capital gains, California state tax, and depreciation recapture — combined, roughly 35 to 40 percent of the gain on a significantly appreciated property. Purely on the tax math, the best financial outcome for your estate is often to never sell at all.
But you are not your estate. You are a person deciding how you want to spend the years you have left, and the tax code does not know or care whether the building is exhausting you. Owners who chase the stepped-up-basis outcome at the cost of ten more years of tenant calls, LAHD compliance, and 2am emergencies are optimizing for a number their heirs will see and they will not.
Income replacement becomes the real objective, not proceeds maximization. A retirement sale is usually paired with a plan to replace the building's cash flow with something that requires none of the management. Comparing a 1031 into a DST against a direct replacement property is the conversation most retiring owners should have before they list, because the answer changes how you should market and price the sale itself.
The refinance option usually isn't really on the table. Owners sometimes ask whether they should refinance instead of selling to preserve the stepped-up basis path. Selling vs. refinancing is worth running the numbers on, but for a retiring owner the honest question underneath the math is whether more debt and continued ownership actually serves the retirement, or just postpones the same decision with a worse balance sheet.
You get to choose your own timeline, which most sellers don't. Unlike an owner forced to sell by a maturing loan or a partnership dispute, a retirement sale can be planned twelve to eighteen months out. That lead time is worth using.
Get the numbers real, not aspirational. Run the should-I-sell-or-keep math honestly, including your actual yield on current market value and what a refinance would realistically release. Retirement decisions made on hopeful numbers get revisited under worse conditions later.
Decide what "retired from this building" actually means to you. Some owners want to be completely out of real estate. Some want the income without the management — a DST, a net lease, a passive fund. Some want a smaller, easier building instead of zero buildings. The sale strategy differs depending on which of these you actually want, so decide before you list, not during escrow.
Handle deferred maintenance before you list, not after an offer. A building that has been managed by someone eager to retire often has the deferred-maintenance list every buyer's inspector will find in the first walkthrough. Address what you can now, while you still have the energy for it, rather than discovering it as a price concession later.
Talk to your CPA about the actual tax number, not the rule of thumb. The 35-to-40-percent range is a planning estimate, not your number. Your basis, your depreciation schedule, and your state of residence at sale all move it. Get the real figure before you decide between selling and holding for the stepped-up basis.
Here's something worth knowing before you list: a retirement-driven sale runs through the exact same process as any other LA multifamily sale. Pricing on legal in-place income, cleaning up the rent roll and RSO registration, preparing the building for buyer diligence, and running a proper marketing process — the complete sale process doesn't have a separate track for owners who are selling because they're ready to stop managing rather than because of a market signal. What changes is not the mechanics of the transaction. It's what happens to the proceeds afterward, and how much patience you have left for the preparation work along the way. A retiring owner who understands this going in doesn't waste energy looking for a shortcut process that doesn't exist — they put their remaining energy into the preparation phase, where it actually pays off.
That said, a retirement sale does benefit from one thing a market-driven sale often can't offer: lead time. An owner selling because rates finally look attractive has to move on the market's schedule. An owner selling because they're ready to retire can plan the listing date, the preparation timeline, and even the choice of broker months in advance, without the pressure of a closing window. Use that lead time. It's the one advantage a retirement sale has that most sellers never get.
There is no version of this guide that tells you selling now is always right, or that holding for the stepped-up basis is always right. What I can tell you, having watched this decision play out across a wide range of owners, is that the ones who regret their choice almost never regret retiring. They regret waiting past the point where the building had already stopped being worth the toll it took. If the tax math is close and the life math is not, the life math should win. It is the one variable in this decision that does not get better with time.
Should I sell my apartment building before I retire, or hold it for the stepped-up basis?
Purely on tax math, holding until death eliminates deferred capital gains entirely through the stepped-up basis. But that math doesn't account for the years of active management between now and then. If you are done managing, the tax savings of waiting have to be weighed against years of a job you no longer want.
How do I replace the building's income when I retire?
Most retiring owners look at either a 1031 exchange into a passive structure — a DST or a net-lease property — or a direct replacement property with professional management already in place. The right answer depends on how much income you need and how much involvement you're willing to keep.
Is there a best time of year to sell before retiring?
Less than owners think. Timing around your own readiness and the building's preparation matters more than the calendar quarter. A well-prepared building sells well most times of year; a poorly prepared one struggles regardless of season.
Michael Sterman is Senior Managing Director Investments at Marcus & Millichap.
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